October 31, 2008 marked the birth of bitcoin. Ten years on, the world’s first cryptocurrency is at the forefront of a complex financial system viewed warily by markets and investors.
From
its first evocation amid a global financial crisis, in a white paper written by
Satoshi Nakamoto, an unknown pseudonym, bitcoin conveyed a political vision.
The “abstract” set out in the paper for bitcoin, currently worth about $6,400
per unit from a starting point of virtually zero, was for “a purely
peer-to-peer version of electronic cash (that) would allow online payments to
be sent directly from one party to another without going through a financial
institution.”
A
decade on, this continues to be carried out via a decentralised registry system
known as a blockchain. Such ambition for a cryptocurrency was fuelled by the
bankruptcy of US investment bank Lehman Brothers in September 2008, an event
that discredited the traditional system of “a small elite of bankers… (that)
establishes monetary rules imposed on everybody”, according to Pierre Noizat,
founder of the first French bitcoin exchange in 2011.
Following
its creation, bitcoin evolved for several years away from the public eye,
grabbing the attention for the most part of geeks and criminals — the latter
seeing it as a way to launder money. After bitcoin surpassed $1,000 for the
first time in 2013, it began to attract the attention of financial
institutions. The European Central Bank compared it to a Ponzi scheme, but Ben
Bernanke, then head of the US Federal Reserve, hailed its potential. – A
turbulent childhood – In early 2014, the cryptocurrency faced its biggest
crisis to date, with the hacking of the Mt. Gox platform, where about 80
percent of all bitcoins were traded.
The
result was a collapse in their value, leading to predictions of the virtual
currency’s death. It took until early 2017 for bitcoin’s price to fully
recover. That marked the start of a “turning point” according to Noizat, as the
controversial cryptocurrency then rocketed to more than $19,500 by the end of
the year according to Bloomberg data. That meant bitcoin had a total
capitalisation of more than $300 billion, according to the specialised website
Coinmarketcap.
By
January 2018 the value of all cryptocurrencies exceeded $800 billion, before
the bubble burst. The concept of a digital currency has progressed
substantially thanks to bitcoin, cryptocurrency analyst Bob McDowall told AFP,
pointing to the creation of 2,000 rivals. “It becomes more than a technological,
economic innovation. It almost becomes a religion for some people,” he noted.
According to Anthony Lesoismier, co-founder of investment fund Swissborg which
offers portfolios based on blockchain, “the real revolution has been on a
philosophical level”.
But
for economist Nouriel Roubini, decentralisation in crypto is a myth. “It is a
system more centralised than North Korea. Miners are centralised, exchanges are
centralised, developers are centralised dictators,” Roubini tweeted. If the
initial idea was for bitcoin to facilitate payments, a majority of observers
recognise that it is used above all as a store of value or as a speculative
instrument owing to volatility in its value.
“You
need 20 years for this kind of… technology to take hold completely,” said
Noizat, who is banking on faster transaction speeds for bitcoin. As it stands,
about five to ten bitcoin transactions can be processed per second compared
with several thousand for Visa cards.
Looking
ahead, US market regulators are considering applications for bitcoin-based
exchange-traded funds, which if approved by the Securities and Exchange
Commission would see the virtual currency become part of a financial system it
set out to bypass. “We must cross some bridges in the short term” to generate the
general public’s interest and trust, said Lesoismier, who described himself as
both an “idealist” and “realist”.
Source:
Vanguard
0 comments:
Kindly comment here!